NRCC chairman says funds were embezzled

The National Republican Congressional Committee said Thursday that its former treasurer, Christopher J. Ward, may have embezzled hundreds of thousands of dollars from the committee, but GOP sources said the total lost by the NRCC and other Republican committees could be as high as $1 million.

The NRCC said that Ward made "several hundred thousand dollars in unauthorized transfers of NRCC funds to outside committees whose bank accounts he had access to, including joint fundraising committees in which the NRCC participated. He also appears to have made subsequent transfers of several hundred thousand dollars in funds from those outside committees to what appear to be his personal and business bank accounts."

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These joint committees from which Ward allegedly diverted funds include special committees set up to raise money for an annual dinner with President Bush put on by the NRCC and the National Republican Senatorial Committee. Those dinners usually meant millions of dollars for the Republican campaign committees.

One GOP insider said Ward also diverted funds from the leadership PACs and reelection campaigns for which he worked, usually in smaller amounts, although the insider said the total taken from those PACs and campaigns may actually end up being greater than the losses suffered by the NRCC itself.

NRCC Chairman Tom Cole and Rob Kelner, a lawyer with Covington & Burling retained by the NRCC to oversee its response to the accounting scandal, said the transfers go back at least until 2004 but that the NRCC is still unsure how much was diverted from committee coffers.

"The exact dollar figures are currently a moving target, and as the investigation progresses, it is entirely possible that these figures will change, either by increasing or decreasing," the NRCC said. "The forensic investigation has also noted numerous instances in which the unauthorized transfers were either not accurately reported, or were not reported at all, on FEC reports."

A GOP source said that, in some cases, Ward cut checks, in small amounts, from a lawmaker’s campaign or leadership PAC directly to his own bank account. At other times, the sources said, Ward used a dummy company as a go-between, but the money finally ended up in his account.

The source said that Ward issued a $4,208 check to himself in December from Texas Republican Rep. Jeb Hensarling’s PAC, although he returned that money in early February, after the NRCC accounting scandal became public.

Ronald C. Machen, an attorney with WilmerHale in Washington who is representing Ward, did not reply to an e-mail seeking comment.

The NRCC has brought in PricewaterhouseCoopers to conduct a forensic audit. Cole estimated that the investigation into the accounting problems has already cost the committee between $360,000 and $370,000, and he acknowledged the internal audit was far from complete.

So far, the NRCC has decided to file a new FEC disclosure statement for January 2008 stating that it had $740,000 less cash on hand than previously reported. The NRCC's actual cash on hand at the end of January was $5.7 million, not the $6.64 million it reported to the FEC, the committee says.

While it's possible that the committee could face FEC fines for misreporting its financial data, Cole said he didn't think such punishment was warranted.

"Our working relationship with the FEC has been very good," Cole said. "We were the victims here."

Kelner, who said the committee has been cooperating fully with an FBI investigation into the matter, said he was "not aware of any reason why the NRCC should have legal exposure, particularly because the committee has been very aggressive in disclosing what it knows to the appropriate law enforcement authorities."

The NRCC said Thursday that, after becoming treasurer in 2003, Ward "submitted to the NRCC's bank and to the NRCC leadership bogus audit reports for 2002, 2003, 2004 and 2005. The additional bogus audit was submitted to the NRCC's bank for 2006."

The NRCC also said there was a $200,000 discrepancy in the NRCC's line of credit, meaning the committee owed more than it thought it did. It is unclear if the NRCC believes that Ward was responsible for this discrepancy.